By John S. Simpson Jr.
Senior Market Strategist, Walsh Trading
March 7, 2025
Market Overview
In my opinion, the livestock markets have been extremely dynamic over the past few weeks, with live cattle and feeder cattle maintaining bullish momentum while the hog market has battled increased volatility. The latest Commitment of Traders (COT) report provides insight into the positioning of major market participants, reflecting strong demand for cattle but a more uncertain outlook for hogs.
Feeder Cattle and Live Cattle: Supply Constraints and Higher Prices
In my opinion, feeder cattle prices have surged as supply constraints remain a dominant theme in the market. as supply constraints remain a dominant theme in the market. Cash cattle prices have reached record highs, with recent reports indicating prices as high as $212-$213 per hundredweight in certain regions. The primary driver continues to be the historically low cattle inventory in the U.S., which remains at its smallest level since 1951, according to USDA data.
In my opinion, live cattle futures have reacted accordingly, with April contracts exceeding $204, reflecting ongoing concerns about the lack of available cattle for slaughter. In my opinion, the fundamentals remain bullish, and I see potential for April live cattle to test $210, supported by strong domestic beef demand and tight supplies. According to the CME Group, live cattle futures have seen increased volume, reinforcing the bullish sentiment.
Hogs: Volatility and Export Headwinds
In my opinion, the hog market has faced increased volatility, with lean hog futures recently dipping to $80.80 in the April before rebounding. Additionally, weaker demand from key export markets, particularly China, has added to the bearish sentiment. However, recent short-covering rallies have provided temporary support, and in my opinion, we could see further upside if export demand stabilizes. USDA export reports indicate that pork shipments have slowed, further impacting the lean hog market.
Commitment of Traders (COT) Analysis
In my opinion, the latest COT report suggests that managed money continues to hold strong long positions in live cattle and feeder cattle, reinforcing the bullish sentiment. Meanwhile, in the hog market, funds have been reducing long exposure, reflecting uncertainty regarding future demand.
Key Market Factors to Watch
- Supply Constraints in Cattle: The small U.S. cattle herd continues to drive prices higher, per USDA livestock reports.
- Beef Demand Holding Strong: Despite record-high prices, consumer demand remains robust, with retail sales data from CME Group showing strong movement.
- Hog Market Recovery?: If export conditions improve, we could see a stronger recovery in lean hogs.
- COT Report Positioning: Funds remain committed to the cattle markets but are less enthusiastic about hogs, per the latest CFTC data.
Final Thoughts
In my opinion, the livestock markets remain a tale of two stories: cattle markets benefiting from supply constraints and strong demand, while hogs battle volatility and external pressures. In my opinion, the fundamental outlook for live and feeder cattle remains bullish, and I expect continued upside potential. For hogs, much will depend on export conditions and consumer demand trends.
As always, this is just my opinion and should not be considered as financial advice. Market conditions can change rapidly, and it’s essential to stay informed and manage risk accordingly.
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John S. Simpson Jr.
Senior Market Strategist
Walsh Trading
[email protected]
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